In-house entrepreneurs, -- those "dreamers who --
can increase the speed and cost-effectiveness of technology transfer
from R&D to the marketplace.

The economy of the United States is on
an innovation treadmill. Our competitors enjoy cheaper labor,
cheaper capital. and more government support than we. To maintain
our competitive position, we need superior technology, more
proprietary products and services, and better processes. As our
competitors become more scientific, and managerially sophisticated,
it takes them less and less time to understand and copy- our
innovations. We have to increase our speed and cost-effectiveness of
innovation in our country,- to match our competitors' increasing
sophistication in copying and capitalizing on our
technology,.

Most large companies operate stable businesses
well. However, they are not as adept at starting new ones. Most are
good at developing a new business from the idea stage on through
research and prototype development. But they falter at the start-up
stage-the stage of commercialization. Inefficient commercialization
by big business has created opportunity for venture capitalists. The
venture capital industry is producing 35 percent return on
investment by taking frustrated R&D people and their rejected
ideas out of large companies, and financing the commercialization of
those ideas. That the venture capital community can make 35 percent
ROI on rejected ideas and people should be a constant rebuke to
everyone in the R&D community. Venture Capitalists have found a
different way of managing innovation that gets returns which few of
us can equal inside large organizations.

A Missing Factor In Corporate
Innovation

The primary secret of the venture
Capitalists' success is revealed in the way they select ventures for
investment. They say: " I would rather have a class A entrepreneur
with a Class B idea than a class A idea with a Class B
entrepreneur." They put their faith in choosing the right people and
then sticking with them, while many corporate managers would feel
uncomfortable with a strategy dependent on trusting the talent,
experience, and commitment of those implementing it. I believe the
primary cause for the lower returns of corporate managers of
innovation is their failure to understand the importance of backing
the right people-this is their failure to identify, support, and
exploit the "intrapreneurs" who drive innovation to successful
conclusions.

Imagine the organization as a Cell, with
R&D producing new genes. In the cell, there are also the
productive capacity of the ribosomes, which are like factories ready
to use the information in those new genes to produce new products.
What's missing in most large organizations is linkage from idea to
operation-by analogy the RNA. In most large organizations there are
exciting new genes-new technologies but no broadly effective system
of technology transfer. What is absent are large numbers of
intrapreneurs devoted to turning new technologies into profitable
new businesses, cost reductions, new features, and competitive
advantages. Because we have tended to have scientific standards of
excellence in R&D, we have tended to honor the inventor more
than the implementor, more than the intrapreneur. The result is that
we not only reward inventing more than intrapreneuring, but our
management systems are far more supportive of invention than of
commercialization.

The future role of R&D, the size of its
budgets and its degree of autonomy all depend on efficient
technology transfer. Older "hand-off systems" of development which
ignore the role of the intrapreneur don't work, or at best are so
slow and expensive they make R&D appear ineffective.
Cost-effective innovation happens when someone becomes the
passionate champion of a new idea and acts with great courage to
push it through the system despite the "Not Invented Here" syndrome,
and a11 the other forms of resistance which large organizations
supply it is therefore important for R&D managers to understand
and recognize intrapreneurs who can, when properly managed, greatly
increase the speed and cost effectiveness of technology
transfer.

Dreamers Who Do

Intrapreneurs are the "dreamers who do."
In most organizations people are thought to be either dreamers or
doers. Both talents are not generally required in one job. But the
trouble with telling the doers not to bother about their dreams is
that they dream anyway. When they are blocked from implementing
dreams of how to help your company they're dreaming dreams of
revenge. A mind is meant to imagine and then act. It is a terrible
thing to split apart the dreamer and the doer.

What we need, then, is to restore the place
for vision in everyone's job. One of my favorite stories is the
story, of Nikola Tesla who invented the three-phase electric motor
and a host of other things. It is said that he would build a model
in his mind of a machine, such as a new generator, and then push it
into the background of his consciousness, set it running and leave
it going for weeks while he went about his other business. At the
end of that time he'd pull it back into the foreground of his mind
tear it down and check the bearings for wear. With such detailed
imagination, what need is there for computer-aided design and finite
element analysis?

While few of us can match Tesla's talent,
imagination is the most concrete mental skill that people have. It
Is more concrete than all the tools we have for analyzing businesses
and a11 the formulas we have for analyzing stresses. Imagination is
simply the ability to see something that doesn't yet exist as it
might be. Unless we have Tesla's clarity of imagination, what we see
may not be as precise as the results we can reach from doing
calculations, but our vision is more concrete and more whole than
any formula describing some aspect of a new design. And without this
concrete skill, we do not have innovation.

An intrapreneur's imagination is very
different from an inventor's. Inventors look five or ten years ahead
and say, "wouldn't it be wonderful if such and such." They, imagine
how a customer would respond to their new product, what the
technology would be, how the technology could produce desired
features, and all those sorts of things. Good inventors have the
customer in mind, but their vision is usually, incomplete unless
they are also intrapreneurs. They don't imagine in detail how to get
from the here and now to that desired future. An intrapreneur, on
the other hand, having seen the Promised Land moves back to the
present and takes on the rather mundane and practical task of
turning the prototype into a marketplace success. This too requires
enormous imagination.

Intrapreneurs ask questions such as. "Who
would I need to help me with this? How much would it cost? What
things have to happen first?" and so forth. They may ask "Could we
release this technology- onto the marketplace in product form aimed
at such-and-such a customer need? No. If we did that it would
immediately- bite into a very important market of one of our
competitors who has the ability to respond and before we produced
our second generation products there would be a tremendous
competitive response. Let's back up a little bit. 'What if we put it
out in this way instead? Well it wouldn't do quite as well on the
first round but I begin to see it would give us a little more time
to develop unbeatable second generation products."

Intrapreneurs have to constant juggle
potential implementation plans. They do this in their imaginations
initially. Of course. intrapreneurs also juggle implementation plans
on paper as business plans and drawings, but much of the initial
work is done in the shower, or when driving the car, or any
situation in which one neither feels guilty about not doing
something useful nor can one get to pencil and paper. At such times,
we are forced to use our imaginations, and thus often do our most
creative work.

Distinguish Intrapreneurs From
Promoters

One of the keys to managing innovation
cost-effectively is to choose the right people to trust. Too often
when managers look for intrapreneurs they choose promoters instead.
Promoters are very good at convincing people to back their ideas,
but they lack the ability to follow through. Thus, one of the keys
to managing innovation is to be able to distinguish between
intrapreneurs and promoters.

One of the best ways to separate the
intrapreneurs from the promoters is to see how they handle, and even
how they think about, barriers to their ideas. When analyzing a
potential intrapreneur, think of some of the ways their project
might go wrong. Ask them how they might handle such a problem. Real
intrapreneurs will have explored these problems in their
imagination. They will have considered them while driving to work or
taking a shower. The real intrapreneur has thought of three, five,
or even ten possible solutions. They may pause for a moment trying
to figure out which of those answers would appeal most to you
because intrapreneurs do have a certain ability to sell, but they
are not hearing the question for the first time. It will be very
hard for you to think of a problem which they haven't
considered.

Promoters, on the other hand, respond by
saving the problem you bring up will never occur. They remind you
again of how wonderful things will be ten years from now, of the
hundreds of millions of dollars their product will be making. They
will not even talk about the problem because they have no interest
in the barriers along the way, to implementation. They are counting
on you to solve all problems by giving them enough funding. They
just want to tell you why their idea is so much better than anyone
else's. They are, in fact so focused on getting approvals and
funding, that they haven't planned how to get the job done. If you
give them money in the name of intrapreneurship, you will not only,
give intrapreneurship a bad name, but you will waste everything you
invested. The most important thing a manager can do when managing
innovation is to separate out the promoters, and invest only in
intrapreneurs.

Many people doubt that they want
entrepreneurial people in their organizations. Entrepreneurs, they
believe, are driven by greed. They are high risk-takers, they shoot
from the hip, and furthermore, they are dishonest. Fortunately every
one of these myths is false. In fact, entrepreneurs seem to be
driven by a vision which they believe is so important that they are
willing to dedicate their lives to it even when it starts to have
trouble. Every new idea runs into terrible obstacles. People who are
driven only, by a desire for money, or promotion, or status simply
do not have the persistence to move a new idea forward. It is the
person with the commitment to carry, through who will move an idea
into a practical reality.

Intrapreneurs and entrepreneurs are not high
risk-takers, as many studies have shown. They like a 50-50 set of
odds-not too easy not too hard. Having chosen a challenging
objective, they do everything they can to reduce the risk.

Intrapreneurs seem to be equal in right brain
and left brain, equally- intuitive and analytic. They make decisions
based on intuition when data or time don't permit analytical
solutions. When analysis will work, they use it.

Intrapreneurs may operate a little differently
than other people. They often have personalities which make them
difficult to live with, but their difficulties stem less from
dishonesty than excessive directness. They often get themselves in
trouble by saying exactly what they think because they don't seem to
be good at compromising-strong politics are inherent in the cultures
of very large organizations.

A New Monitor for the FAA

Vision and imagination make up half of
"the dreamers that do." Action is the other half.

Intrapreneurs are often in trouble because
they act when they are supposed to wait. They tend to act beyond the
territory of their own job description and function. This boundary
crossing is important. Charles House at Hewlett-Packard is a perfect
example. House developed a new monitor for the Federal Aviation
Administration that turned out to not quite meet the specs. (Failure
is a typical way for stories of innovation to begin.) He responded
to the disappointment by observing that despite not meeting the spot
size criteria for this particular application, the fact that he had
a monitor which was half as heavy, used half the power, and cost
half as much meant he should find out what else it could be used
for. He took the idea to the marketing people who asked the
division's traditional customers if they, would like a monitor that
was cheaper, but which had a slightly blurry display.

Nobody, seemed to want it. Being an
intrapreneur, as opposed to just a researcher, House wasn't
satisfied with talk. He took out the front seat of his Volkswagen
Bug put the monitor in its place, and visited 40 customers in three
weeks. At each stop he moved the monitor into the prospective
customer's shop, hooked it up to their equipment, and asked whether
this thing would do anything that's useful. By the end of the trip
he had found several new, markets. House succeeded because he took
the actions which were necessary for his prototype to go from
technology, to business reality.

There are two important points in this story.
One is that intrapreneurs perform their own market research. If your
scientists and engineers are not allowed to do their own market
research, then you have a major barrier to innovation.

The second point is that generally a new idea
is so ugly only its mother could love it. Consequently, it is
unrealistic to think that people in Marketing will understand a
research idea in its early stages well enough to do valid marketing
research. In general. they ask the wrong questions. They are trying
to find out if it is a good idea, which in the early stages is the
wrong question. The right question is: "I know this is a good idea;
how am I going to present it in a way that some class of customers
will agree? 'What are the ways in which this is a good idea? Who
really needs it? How do I have to say this so that they will
understand?"

The early stage of market research is
searching for the market, not testing whether or not it is there. It
is only after we have found a group of customers and learned how to
talk to them, redesigned the product to meet their needs, and
figured out how to position the product, that we can do the
traditional form of market research which asks, "Will they buy it-is
this a good idea?"

The idea of technically driven research is
drifting into disrepute. We are told that we must first carefully
identify, market needs and then invent what customers already know
they want. This is rarely the way fundamental innovation works
because we are not smart enough to invent to order. We are lucky- to
invent anything with fundamentally new and protectable properties,
and when we do so, we must then hunt for the most applicable
markets.

To be sure, researchers do pursue what they
perceive to be marketplace needs, but the final applications often
turn out to be in some entirely different market. Scotch Tape was
invented to better insulate refrigerated railroad cars. Radio was
invented for point-to-point communication-missing the broadcast
market entirely. Riston circuit board systems begin with a failure
to produce a new photopolymer-based photographic film.

It is important for researchers to know about
the marketplace, but important also to realize that for all of the
thousands of unfilled or poorly filled marketplace needs each of us
wishes to invent a proprietary solution for, we have the ability to
invent a few. We know an anti-gravity, device would be useful and
probably well-received by customers. We don't work on it because we
don't know how to begin.

We know that television sets with better
reception are desirable. Most of us don't work on them because we
believe others have a competitive advantage in making them
inexpensively.

We left Hewlett-Packard's Charles House doing
his own market research and thus doing somebody else's job, as
intrapreneurs often do. He came home enthusiastic and his boss' boss
Dar Howard, believed in him and told him to go ahead for another
year. Unfortunately, a few months later the chairman visited the
laboratory in Colorado. David Packard listened to the marketing
people say that the idea was no good, even after House's research.
He also heard a negative vote from the corporate chief of
technology, who was backing a different technology.

At that time, Tektronix, was giving
Hewlett-Packard a hard time in the division's core business, and
Packard said that when he came back to this laboratory next year, he
did not want to see this product in the lab. Dar Howard went back to
House and told him he just didn't know what excuse he could give for
going on now. With that remark he left the door open just wide
enough for Chuck to get his foot in. He showed that he felt for
Chuck, but ...

House said, "What exactly did Packard say?"
"When I come back to this laboratory next year, I don't want to see
this product in the lab" "Good," Said Chuck, "we'll have it out of
the lab and into manufacturing." And so it was. The monitor was used
in the first manned moon landing and turned out to be a great
success.

A few years later, Packard awarded House the
Hewlett-Packard Award for Meritorious Defiance. "For contempt and
defiance above and beyond the call of engineering duty," the
certificate read. He made it clear that at Hewlett-Packard, courage
counts more than obedience. Innovation requires this attitude.

Succeeding at Intrapreneurship

Every new idea will have more than its
share of detractors. There is no doubt that being an intrapreneur is
difficult, even in the most tolerant of companies. So how can people
succeed at it?

1. Do anything needed to move your idea
forward. If you're suppose to be in research but the problem is in a
manufacturing process, sneak into the pilot plant and build a new
process. If it is a marketing problem, do your own marketing
research. If it means sweeping the floor, sweep the floor. Do
whatever has to be done to move the idea forward. Needless to say,
this isn't always appreciated and so you have to remember that:

2. It is easier to ask for forgiveness than
for permission -If you go around asking, you are going to get
answers you don't want, so just do the things that need to be done
and ask later. Managers have to encourage their people to do this.
It may be necessary to remove some layers of management that
complicate and slow down the approval process.

3. Come to work each day willing to be fired.
- I began to understand this more from talking to an old sergeant
who had seen a lot of battle duty. He said, "You know, there is a
simple secret to surviving in battle; you have to go into battle
each day knowing you're already dead. If you are already dead, then
you can think clearly and you have a good chance of surviving the
battle."

Intrapreneurs, like soldiers, have to have the
courage to do what's right instead of doing what they know will
please the myriad of people in the hierarchy who are trying to stop
them. If they are too cautious, they are lost. If they are fearful,
the smell of fear is a chemical signal to the corporate immune
system, which will move in quickly to smother the "different"
idea.

I find that necessary courage comes from a
sure knowledge that intrapreneurs have-that if their employer were
ever foolish enough to fire them, they could rapidly get a better
job. There is no way to have innovation without courage, and no real
courage without self-esteem.

4. Work underground as long as you can. --
Every organization has a corporate immune system. As soon as a new
idea comes up the white blood cells come in to smother it. I'm not
blaming the organization for this. If it did not have an immune
system it would die. But we have to find ways to hide the right new
ideas in order to keep them alive. It is part of every manager's job
to recognize which new ideas should be hidden and which new ideas
should be exposed to the corporate immune system and allowed to die
a natural death. Too often it is the best ideas that are prematurely
exposed.

The Intrapreneurial Shortage

I've made an interesting discovery since
I wrote Intrapreneuring. I used to think potential intrapreneurs
were commonplace, that they were hard to find because they were in
hiding. But I have found they are more rare in most large
organizations than the 10 percent who are entrepreneurial in the
population at large. There is a scarcity of people who are, brave
enough to take on the intrapreneurial role: therefore, we have to
lower the barriers and increase the rewards.

If there are not enough intrapreneurs in your
company you can hire more. There are two ways to go about it:
raiding successful intrapreneurs from other companies, and hiring
more intrapreneurial people in entry positions.

Were I running an R&D organization, I
would even take ads saying, "Wanted: Intrapreneurs." One could
capitalize on widespread intrapreneurial frustration and selectively
hire a fair number of courageous people who would move innovation
forward. Second, I would focus on hiring potential intrapreneurs out
of school. Here are two hints: One is that candidates' transcripts
should contain both A's and D's. When intrapreneurial people are
interested they get As. When they are not interested, they don't
pretend. They are self-driven.

The second hint is that any history of
self-employment predicts intrapreneurial success. The strongest
demographic predictor of intrapreneurial success is having one or
more self-employed parents. It is more important than birth order or
any of the other commonly cited predictors. I guess it is a matter
of having an entrepreneurial role model.

It is a particularly good idea to hire farm
kids. They seem to make good intrapreneurs. I guess farm kids grow
up with a kind of a can-do attitude and it never occurs to them that
there is anything they aren't supposed to do. If the hay is on the
ground, the bailer is broken and it is going to rain in six hours,
you don't worry that you don't have a degree in bailer mechanics.
Somehow farmers learn to get the job done.

Training Intrapreneurs

Training your people in acquiring
intrapreneuring skills is as important as knowing whom to hire.
Though most people imagine that intrapreneurs are born and not made,
we have had good results training intrapreneurs. In our Intrapreneur
Schools we ask for volunteers. This way we are training a select
group of people who are courageous enough to volunteer for an
intrapreneurial role. Training succeeds partly because it gives
people permission to use a part of themselves that their supervisors
have been trying to beat out of them for quite some time. They look
around the room and say "My goodness, there are other people like me
in this world and it seems that the corporation is really serious
now about wanting this aspect of me employed." They get a tremendous
rejuvenation and rebirth of vision and drive.

In addition, most intrapreneurs are missing
skills for which training can help. They have some functional
abilities which are often technical, and they've been convinced that
they really cannot understand some things like accounting or
marketing. They believe that those blind spots keep them from being
the general manager of a new idea. They do not have to become
excellent at all functions; they just have to understand enough to
work easily with others in those fields. In fact, if the idea is
good, success does not require great sophistication in many
disciplines, just a journeyman like job that doesn't overlook the
obvious. Training should be structured to build teams and so the
whole team should work together while training.

Managing Intrapreneurs

Managers must choose intrapreneurs who
are persistent, impatient, who laugh, and who face the barriers.
Then they have to be willing to trust that the intrapreneurs know
how to do their jobs and must give them what they are asking for
resources and people to help carry forward their ideas. Since
resources arc not infinite, they may have to take these things away
from other people who are not intrapreneurs.

I know we are living in an age of head-count
restrictions. Too often this means that everything stays the same.
Whoever has three people gets three people next year. Anything new
and growing will have too few people resources, and anything old and
over the hill is going to have too many. We have to be courageous in
sweeping out the old and giving the right people the resources they
need to get the job done. The most effective use of a manager's time
is in choosing whom to trust.

One very effective approach is to create
heroes so intrapreneurs have role models within the company. Select
a few of the most courageous intrapreneurs and publish their stories
for everyone in the company to read. These stories should be written
honestly, so that all the difficulties and problems faced by the
intrapreneurs are presented so that people can see how barriers were
overcome.

Keep R&D Close To The Action

It is important to bring your
researchers close to model shops and pilot plants that allow dirty
finger research. R&D people need to be able to test their ideas
themselves-if they can't, they will fall back on more intellectual
forms of research. Obviously, we'll hear more about discretionary.
Time, the so-called 15 percent rules that many companies have. Other
useful reward tools are seed money programs, the creation of
cross-functional teams, and other ways to reduce the
bureaucracy.

In conclusion, I issue a challenge to get your
people to display courage, to display integrity and honesty to have
a sense of proprietorship's if the business belonged to them. Help
them to make the kind of decisions that would have to be made if
that were true rather than the kinds they have to make in order to
negotiate the turfs of a hostile bureaucracy. Encourage them to go
into action and not wait for permission. Talking about these ideas
is not enough. Between the words of top management and the
intrapreneurs who can carry them out there are layers of management
which punish independent thought, courage, impatience, and blunt
honesty This is not something that you can devote a few hours to and
fix. It is probably the most important aspect of your job, more
important than getting the strategy right, because enough attention
is being paid to strategy already.

You cannot have cost-effective innovation
unless you hire, train and encourage intrapreneurs. The future
legitimacy of R&D, the success of America's companies and of her
economy depends on you, the R&D community, to do it right.